Cut the waste, not the people

Cut the waste, not the people

Have we lost our knack with number 8 wire and four-by-two?

Although New Zealanders are working longer hours than our peers we are still slipping backwards in the achievement tables. We seem to have lost the ability to just get on and get the job done. Managers are always being asked to cut costs, to deliver faster, to be more efficient, but right now these demands are even louder. Do you know how to be lean? Do you know how to deliver more with less? Knee-jerk reactions are to cut staff, to outsource, to reorganise and call it ‘Transformation’, to implement the latest models of good practice, and to bring in yet another troupe of expensive suits to tell you what you’re doing wrong. And if you don’t scurry to perform these measures then the CEO might replace you with a bright, shiny new CIO who will.

There is a lot of good advice about how to become more efficient and effective in IT. What I want to share are the downsides of the traditional approaches and some other, less orthodox tactics, to get you thinking.

• Cutting staff? That will save money won’t it?

Not necessarily. Cutting work saves money, especially waste-work and make-work. Cutting staff just makes it harder to get the work done. And when, as often happens, they get replaced by contractors at a higher daily rate, you’ll find you are spending more, not less.

• Outsourcing? That must be cheaper!

By no means! Outsourcing will save money only if the outsourcer can perform your work a lot more efficiently or cheaply than you can.

An outsource partner can get economies of scale by sharing resources across multiple organisations that need a particular expertise part-time or have peaks and troughs at different times. But for resources that are specific to your organisation, an outsource partner can’t be cheaper unless their output is far greater or they pay their staff a lot less.

Paying people a lot less is how the third world software houses manage to do your work more cheaply. So yes you can save money by using cheaper third world resources instead of New Zealanders, although the gap is shrinking.

Your vendor partner can generate far greater output than you do? This is sometimes the case if staff are poorly skilled and unmotivated and/or you don’t have any support systems and processes. Or, more likely, you have too many systems and processes and are suffocating!

If this is the case then the outsourcing is not fixing your problem, it is the replacement of your weak management with someone better. Perhaps the CEO is right after all…

• RFP processes and competitive tenders – get you the best solution at the best possible price, right?

Be honest, the main reason for those rigorous RFP processes is not to get the best deal, but to cover your [backside]! Politely, it is known as risk management. INCIS (Integrated National Crime Information System) of the NZ Police in the 1990s, has a lot to answer for – probably tens of millions of extra bureaucracy dollars to ensure we do not fail rather than accepting some failures and investing money in more opportunities. RFP processes take a lot of time and money. Yet for some projects, getting something done quickly is more important than screwing the best possible deal out of a vendor. How many projects have wasted months, even years, in selection, approvals and negotiation, and then been squeezed in the latter phases? XT anyone?

And, don’t bank on the RFP process giving you better negotiating power, particularly if you’re a government agency. It is claimed that when suppliers see a government job on GETS their rates automatically go up. Because they know that many civil servants care more about reputation and risk than cost. Cost is often blanked out so their evaluation panels aren’t tainted by thoughts of mere money. Huh? Cost is always one of the top selection criteria for any self-respecting business that is putting up its own money. Why should it be different with the taxpayers’ money?

• Fixed price quotes save money

No. Once again, their main purpose is to reduce risk — of over-running your budget. Fixed price quotes come at a premium. And the vendor’s objectives then naturally rearrange themselves to reduce their risk, first, and deliver the best outcome for you, second. You will find yourself ‘change-controlled’ every step of the way, and boy does that cost money!

• A new computer system will save money

A new computer system may increase and improve the services you can offer, reduce a technology or resourcing risk, and help you make better decisions. They can automate manual work and reduce errors. But they seldom save you more money than they cost in the first place.

Doesn’t mean it’s wrong to put in new systems, but the business case needs to be broader than tangible cost savings. And beware of exaggerating either the cost savings or the risks of the old system. The business will never trust you again. If the case doesn’t stack up, do something simpler instead.

• ‘Capability Maturity Models’ mean greater efficiency, don’t they!

Capability Maturity Models are a smart marketing device by offshore software houses to convince you that they are better than you, and you should outsource more work to them. The models mean that they can get boys and girls fresh out of grad school to undertake your work, because their processes are so well-documented and ‘repeatable’ that they don’t need experienced people to do the work. (Hello? Would you pick your plumber this way? Just because they have really good paperwork? Yeah right.)

CMM endeavours to replace the need for retention of expertise with documented processes. That might work in a relatively simple and unchanging environment. However, when was your IT environment last fixed and simple?

Some other tactics you might consider instead…

• Make decisions faster

How much information do you need to make an informed decision? Say 50 percent if you’re a gifted entrepreneur and it’s your money; 75 percent if you’re an expert; 500 percent if you’re a government department or a large corporate.

But the time spent waiting for a decision is hugely expensive in projects. Decisions aren’t that hard. If you have several options that will work, then you’re lucky. It doesn’t really matter which you pick. Just get on with it.

• Less money, tighter deadlines

Have a limited budget and try to not exceed it by too much. A company I once worked for had far too much money to spend, which made it very difficult to deliver anything. This is a very well-kept secret (that we try to keep secret from Finance). You do know that IT work always expands to use up the budget available? Make that work for you by having a smaller budget; then you will be able to deliver things faster!

Another tactic is letting your vendor know what your budget is and telling them to give you as much as they can for that amount. You can get surprisingly good deals. The corollary is that they have to believe you when you say you can’t get any more.

• Cut bureaucracy

Don’t we all wish there were more teachers, nurses and policemen? But instead Government agencies seem to spend their budget on beefing up their middle management and administration functions.

It is the same with IT departments. How many real producers have you got down at the coalface? How many bureaucrats? While a certain amount of policy and procedure is necessary, as organisations ‘mature’ they tend to produce more and more compliance, audits, signoffs, gates, reports, checklists, surveys and reviews. Make sure you don’t have more monitors than workers or else you really are stuffed.

• Reduce support and maintenance contracts

These are typically areas where large amounts of money spill out of your budgets and into the coffers of your suppliers. In return, you get a reduction in a remote risk rather than anything material. The contracts don’t actually guarantee against failure. All they guarantee is that the vendor will respond to a fault in a certain timeframe.

I recommend taking out the contract for the first year until the technology is stable and then reviewing whether what you get is worth the cost.

• Ask your people

Finally, the best way to improve anything is to ask your people. Explain to them the issue or the challenge. And listen to their ideas. Give them the power to make a difference themselves.

Jenny Mortimer has been a judge for the Computerworld CIO Excellence Awards since winning it herself when CIO at Saturn Communications. These days she is a CIO for hire, and occasionally offers ‘ICSA’ (Independent Common Sense Assurance!) consulting services. She can be contacted via

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Tags investmentoutsourcingeconomic crisisCIO rolestrategycost cutting

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